Costa Classica Pull-Out Hurts Cammell Laird

Tuesday, November 28, 2000
A British shipbuilding union sought urgent talks on Friday with the UK trade secretary to save 700 jobs threatened by the likely loss of a contract at Merseyside shipbuilders Cammell Laird Holdings Plc, Reuters reported. The Italian cruise liner Costa Classica, owned by the Costa Crociere unit of U.S. group Carnival Corp, had been due to arrive for refitting at the docks in northwest England but was now heading back for Genoa. "It is bad news for the Merseyside yard...but we are not purely a shipbuilding company," a Cammell Laird spokesman said. Cammell Laird's shares and bonds sank on the news the company faced potentially lengthy litigation over the contract. The stock closed down 39 percent on Nov. 24. Costa Crociere said it had postponed delivery of the liner because work at the shipyard was behind schedule. "Up to the present, Costa has not exercised its right to terminate the contract due to the delay, but it has requested that a competent Board of Arbitrators ascertain the contract situation without affecting the actual progress of the work," it said in a statement. The $72 million cruise ship conversion contract is the biggest individual piece of work at the Liverpool yard. "The arbitrator has been requested to determine the legality of whether Costa Crociere has the right to postpone delivery of the vessel and/or terminate the contract," Cammell said. The company said it had taken legal advice about its contractual position and considered there were no such rights. But Costa Crociere wished to delay delivery of the vessel until arbitration had been completed and it was unclear how long this process would take. Cammell said it was six months into the contract that runs through to March. On Sunday, the Costa Classica was supposed to have been chopped in half and have a new 44.6 m (146 ft.) section welded to its middle. Dealers said the precipitous fall in the company's share price to its lowest since April 1998 made Cammell vulnerable to a takeover. "The selling has been overdone, but with much of the U.S. closed for Thanksgiving, fund managers here are taking advantage," one dealer said.
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